Technical Analysis: How Double top pattern is traded

Double top pattern is one of most simple and reliable pattern in technical analysis, there is high probability that a trader will predict correct move most of time. This pattern is very easy to recognize and taking positions is quite simple. You can apply this to any time frame chart may it be weekly, daily or any intraday time frame chart. Have a look at the below image.

Double top pattern

Steps to follow:

When the price action is at the second top level one can take short entry(short position) in that stock, this short selling is applicable only for the second time and when next time (third time and so on) same level is approached then trader must remain cautious. This pattern gives you excellent risk reward ratio, most of the time you are going to get 1:2 ratio. In many case it also goes as high as 1:5, so 1 part is your risk and 5 parts are reward.

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